https://www.taxtmi.com/caselaws?id=55358 Disallowance of interest on borrowed funds allegedly diverted for non-business purposes was held to depend on a comparison between total interest-free advances (including partners' debit balances) and total interest-free funds available. The ITAT held that "interest-free funds" must include owners' capital, accumulated profits, and other interest-free creditors/loans; if advances do not exceed such funds, no disallowance arises, and if they exceed, only proportionate disallowance is permissible. The CIT(A)'s approach was upheld with this modification, and the matter was remitted to the AO solely to recompute any disallowance accordingly. Separately, interest disallowance relating to one partner was sustained due to admitted disallowance and differing facts. en-us Fri, 29 Jun 2001 00:00:00 +0530 Mon, 22 Dec 2025 17:01:00 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=55358 Disallowance of interest on borrowed funds allegedly diverted for non-business purposes was held to depend on a comparison between total interest-free advances (including partners' debit balances) and total interest-free funds available. The ITAT held that "interest-free funds" must include owners' capital, accumulated profits, and other interest-free creditors/loans; if advances do not exceed such funds, no disallowance arises, and if they exceed, only proportionate disallowance is permissible. The CIT(A)'s approach was upheld with this modification, and the matter was remitted to the AO solely to recompute any disallowance accordingly. Separately, interest disallowance relating to one partner was sustained due to admitted disallowance and differing facts. Case-Laws Income Tax Fri, 29 Jun 2001 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=55358